From October 1 to November 12, the U.S. faced the longest government shutdown in its history. Most federal agencies during this time frame remained non-operational, including the Bureau of Labor Statistics (BLS), which is responsible for collecting, analyzing, and releasing data regarding labor economics and statistics. The department measures unemployment, wages, and inflation by way of the Consumer Price Index (CPI). These numbers are released monthly, giving investors, businesses, and Federal Reserve officials insight into the economy’s performance. The BLS’ information is then used to inform the Federal Reserve officials’ decisions regarding potential rate cuts.
These past two months, however, it has become increasingly difficult to determine an accurate pulse of the economy without the BLS data. The Bureau of Economic Analysis (BEA) announced it cancelled the Q3 advance estimate for the GDP, which was originally planned to be released on October 30. It was then delayed even further before being entirely abandoned. The BEA plans to release data on consumer spending, earnings, and savings on December 5. In the same pattern of delays, the September jobs report was delayed to November 20, far after the traditional release date.
Without the CPI and monthly employment data, Federal Reserve officials were unable to gain a full understanding of the economy’s performance in October, and it is unclear whether the missing data can ever be recovered.
An integral part of economic data is household information, in which data is collected from each household. Some questions asked include whether or not the household is looking for work and if the household is employed, and if so, how many hours were worked. Data regarding household income is unreplicable, so it is hard to assume that information will ever be accurately found or recreated.
The CPI also relies on the prices of individual items — government officials visit businesses and gather prices of thousands of individual items. That data is close to impossible to collect after the fact, as officials cannot realistically gather month-old prices from every business. The long-term ramifications of such an economic blackout are yet to be seen, and is something economists will be keeping an eye out for.
In the short term, it was initially hard to assume what the Federal Reserve’s reaction to the shutdown would be. Markets stumbled because investors were unsure whether the Federal Reserve would cut rates or not. Without all the data points, the Federal Reserve must work off of an incomplete and potentially inaccurate view of the economy as they go into their December meeting to deliberate potential rate cuts. Even before the shutdown, BLS data collection was reduced due to staff shortages.
This is the first time in history that Federal Reserve officials must make a decision with an entire month’s worth of missing data, increasing uncertainty in the markets. Apart from this, the shutdown also impacted the U.S. GDP, with the Congressional Budget Office (CBO) estimating a six-week shutdown reducing GDP by 1-2%. The CBO also estimates the shutdown took away $14 billion from the economy, and it is hard to say whether that money will be recovered. Looking forward, investors are anxious for the Federal Reserve’s December meeting, and businesses around the country are hoping to recover from the shutdown.
